Articles

Basic Mortgage Management
Merri Raymond - Home Loan Professional

Today, most Americans are unknowingly on a path that will result in paying around two times the original price of their home. Consider a purchase price of $263,500 and minimum down payment of $13,500 for a loan amount of $250,000. With a 6% interest rate, the result would be paying up to $289,000+ in interest and finance charges if minimum payments are made for 30 years. Principal, interest, and finance charges* could exceed $539,000 - more than twice the original sales price of the home.

There are different ways to pay less for a mortgage.

- If you have less than 20% equity in your home, you will be required to pay private mortgage insurance (PMI). Although not considered in the calculations above, PMI could add $150 - $200 to monthly payment detailed above. Check with your lender to see if you are eligible to drop your PMI.

- Make extra principal payments using tax refunds, bonuses, or other “extra” income to pay down your mortgage. An extra $2,000 paid to principal annually could take nearly 8 years off your 30 year mortgage. Making an extra $50 payment each month could shave off nearly 3 years.

- Maintain your credit. High credit scores can determine whether or not you qualify for a mortgage, what program(s) you are eligible for, and/or the loan fees and interest rate you will be required to pay according to the perceived risk.

- Check with more than one lending source before your credit report is pulled. Talk with a variety of lending sources – banks, brokers, credit unions – to find the best deal. Request a good faith estimate from each lender and compare them. Become educated as to which costs will be the same from lender to lender and which costs you may be able to negotiate.

- Borrower within your means and find a program that meets your needs. It’s easy to end up “house poor” by obtaining a mortgage that stretches the budget too far or getting in to a loan program that doesn’t suit your needs. Common sense and education about loan programs may save you tens of thousands of dollars in the end.

Mortgages provide most people with the opportunity of home ownership that otherwise would never be possible. However, a mortgage, like other goods and services, should be carefully acquired and prudently managed.

*Example does not include all finance charges

Learn more about how the Money Merge Account works to help manage your mortgage